Texas Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares

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Multi-State
Control #:
US-1058BG
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Word; 
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Description

A Legend is a statement on a stock certificate noting restrictions on the transfer of the stock, often due to SEC requirements for unregistered securities. The Securities Act of 1933 regulates the initial sale of securities to the public. Some securities are exempt from coverage of the Act. Certain stock issue transactions are also exempt (i.e., exempt from registration with the Securities and Exchange Commission). This Legend restricts the transfer of stock in accordance with the Articles of Incorporation or the Corporation's Bylaws or a Shareholder's Buy Sell Agreement.

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FAQ

The transfer agent will require an opinion letter from the issuer's counsel or from his or her own lawyer plus 144 papers completed by a broker?stating that the restricted legend can be removed.

The purpose of the restrictive legend or notation is to protect the issuing company from loosing its private placement exemption for the initial sale of the securities and to notify the investor that the restricted securities cannot be resold into the public securities market without satisfying certain requirements.

Rule 144 is a set of regulations that outline the conditions in which the sale of unregistered or restricted stock shares can be sold. Typically, criteria must be met before a sale is allowed, including a minimum period in which the stock should be held, which can be up to one year.

A restricted security must bear a legend giving notice of the restrictions. That legend which must be removed after the restrictions are lifted. A security with a legend cannot be transferred or sold and must be removed before any transaction.

A legend is a statement on a stock certificate noting restrictions on the transfer or sale of a company's stock.

Restricted Securities Securities include common and preferred stock, debt securities (but not all debt is a security), options and warrants.

Removing a restricted stock legend is a matter solely in the discretion of the issuer of the securities. State law, not federal law, covers disputes about the removal of legends. Thus, the SEC will not take action in any decision or dispute about removing a restrictive legend.

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Texas Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares